Using AutoMerge Editing - things aren't merging, what isn't right?
The default automerge distance is very small, as it's usually used with Vertex Snapping.

To use vertex snapping, set the snapping mode to Vertex (&#9096; Ctrl&#8679; Shift&#8633; Tab):



Then hold &#9096; Ctrl while transforming vertices (or toggle the magnet icon in 3D view > Header)

Now automerge should work as expected: 





To increase the automerge distance, adjust the Double Threshold in 3D view > Tool Shelf (T) > Option > Mesh Options: